Stealth Tax Trap: How Frozen Thresholds Are Costing You Thousands
The UK’s frozen tax thresholds have silently dragged half a million more people into higher tax brackets this year, with 7.08 million now paying the 40% rate – a shocking 38.7% increase since 2022. Meanwhile, those paying the top 45% rate has more than doubled (+115.3%) to 1.23 million taxpayers.
Key Stats: The Stealth Tax Epidemic
✔ 7.08m now pay higher-rate (40%) tax – up 38.7% since 2022
✔ 1.23m hit by additional-rate (45%) tax – up 115.3%
✔ Average tax bill up £1,170 (£7,100 → £8,270) since 2022/23
✔ 30.8m remain basic-rate taxpayers (just +6.8% growth)
How Fiscal Drag Is Costing You More
While the government hasn’t officially raised income tax rates, Chancellor Rachel Reeves has maintained the freeze on tax thresholds until at least 2028. This means:
Wage growth pushes you into higher brackets even if you’re not better off
No inflation adjustment = real-terms tax hike
Middle-class squeeze as professionals face 40%+ rates
3 Ways Higher Earners Are Being Hit
1. The £50,271 Trap – Pay More, Keep Less
Once you earn £50,271, your tax rate jumps from 20% to 40%
No adjustment for inflation = more workers hit each year
Example: A £55k salary now pays £1,946 more tax than in 2021
2. The £100k “60% Tax” Nightmare
Between £100k-£125k, you lose your tax-free allowance
Effective 60% tax rate on this band
Child benefit clawback adds further pain
3. Pension Tax Relief Cuts at £60k+
Higher earners lose tax relief on pension contributions
Tapered allowance reduces annual limit to £10k for top earners
How to Fight Back Against Fiscal Drag
✔ Salary sacrifice – Reduce taxable income via pensions/benefits
✔ ISAs & tax-efficient investing – Shield savings from tax
✔ Spread income – Use spouse’s allowances where possible
✔ Review pension contributions – Maximise relief before cuts
The Bottom Line
The stealth tax timebomb means millions face higher bills without real raises. With thresholds frozen until 2028, smart tax planning is essential to protect your earnings.
